My friend is a UK citizen, married to an American and living and working in the US. He has investment income from UK which is taxed there and claims that if he brings that income into the US, it will be taxed again here. My question is the obvious, is this true? And does it matter what type of income it is? tks all
bw
The answer depends on facts which you have not provided. The main issues would be his visa status in the US. Does he have a green card, for example? If he is here on any kind of permanent residency status, he would have to include his worldwike income. Second, what does his wife do? If she files a joint return with him, he must elect to include his worldwide income in the US return. What type of income does not matter. If he can file as a non-resident (Form 1040NR) only compensation for services in the US are taxable. Otherwise, all of his income is subject to US taxes, whether or not he brings the money here. Lanny K. Williams, CPA Nawarat, Williams & Co., Ltd. Income Tax Services for Expatriate Americans
As a resident alien, the U.S. taxes your U.K. citizen friend on his worldwide income. Thus the U.S. taxes him on his U.K. investment income whether or not he brings it into this country. He reports the income on his U.S. return and either deducts the foreign taxes paid as an itemized deduction on Schedule A or claims the foreign tax credit on Form 1116. See Form 1116 / Instructions and Publication
514.
Yes, and no
He will be taxed on the investment income in the UK by the US, whether or not he brings it into the US, assuming he is filing 1040, 1040A or 1040EZ. So bringing it into US is not really the deciding factor. However the treaty comes into play and the US, like many, gives credit for the taxes paid to a foreign country for income earned outside of the US. If those taxes exceed the US taxes on the same income, the US will limit the credit to the amount it taxes the income. He needs to explore Form 1116 or get a competent tax preparer who is familiar with the UK-US tax treaty and foreign income. These are not people located at your corner Liberty or HRB storefronts, though both have people who may have the training. I recommend you let your fingers do the walking through the yellow pages. (I would offer but my specialty is Canada-US treaty, not UK-US.)
tks so much, Frederick, Parris, and LK, an enlightened response from all. bw
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